By Bloomberg Morgan Stanley
Shares of HDB Financial Services Ltd. rallied early in their trading debut in Mumbai on Wednesday after the shadow lender鈥檚 125 billion-rupee ($1.5 billion) initial public offering 鈥 India鈥檚 biggest this year 鈥 attracted strong demand from investors.
The stock rose to as high as 849.85 rupees, reflecting a gain of almost 15% over its IPO price of 740 rupees apiece.
HDB, a unit of India鈥檚 biggest private lender HDFC Bank Ltd., sold shares at the top of their marketed range as the offering lured interest from global funds such as those managed by Morgan Stanley and Allianz SE, as well as from domestic institutions like Life Insurance Corp. of India.
Overall, investors had bid for more than 15 times the shares on offer.
The IPO is the biggest since Hyundai Motor India Ltd.鈥檚 record $3.3 billion deal in October and comes as institutional share placements and listings are picking up after a lull that followed a blockbuster 2024.
India鈥檚 $5.4 trillion stock market is booming again on the back of foreign inflows, with the benchmark index approaching a record high.
A solid debut for HDB could augur well for some other closely watched deals expected later this year, including those of Tata Capital Ltd. and the domestic unit of South Korea鈥檚 LG Electronics Inc.
Shadow lenders like HDB typically target customers undeserved or unserved by banks because of a limited credit history and low income, making them a crucial part of the financial landscape in the world鈥檚 most populous nation.
Their business is seen benefiting in the current environment as the Indian central bank has taken aggressive efforts to stimulate the economy via interest-rate cuts and liquidity injections.
鈥淭here will be investor interest because of HDB鈥檚 asset size and parentage. It鈥檚 a strong brand play,鈥 said Rajnath Yadav, an analyst at Choice Equity Broking Pvt. Further, the Indian central bank鈥檚 recent policy measures are favorable for shadow lenders, he added.
HDB has a loan book of almost $12 billion and operates more than 1,700 branches with about 90,000 employees, according to its IPO document.
Rajiv Mehta, an analyst at Yes Securities India Ltd., said ahead of the debut that HDB鈥檚 鈥減alatable IPO valuation鈥 offers an attractive opportunity for returns. The stock is priced at about 3.4 times book value on a trailing 12-month basis, a discount to peer Cholamandalam Investment and Finance Co. that has a valuation of 5.7 times, according to Mehta.
India鈥檚 top shadow lender Bajaj Finance Ltd. trades at about 6 times its book while Sundaram Finance Ltd. is valued at more than 4 times, according to data compiled by Bloomberg.
A dozen banks helped arrange the HDB deal, including BNP Paribas SA, JM Financial Ltd., and Bank of America Corp.